The
New City aims to foster critical thinking and debate on
the future of our cities
and the disproportionate influence of inner-city thinking on
urban planning and economic, social and environmental policy. Editors: John Muscat,
Jeremy Gilling

Toward the Great
Australian Nightmare: a quarter floor in a high-rise block?

By Wendell Cox

A report by
BankWest shows that housing affordability for the nation’s “key
workers” has become worse than desperate. Key workers are nurses,
teachers, police officers, fire fighters and ambulance operators.
The KeyWorker Housing Affordability
Reportcompares 2007 median house prices in the 8
capital cities to average annual earnings. BankWest considers
housing to be affordable where prices are 5 times or less the
average (mean) annual earnings for each of the key worker
classifications.

Rampant
unaffordability: In seven of the eight
capital cities, the median house price was unaffordable for all
of the five key worker classifications. The situation was only
marginally better in the remaining capital city, Adelaide, where
housing was deemed to be affordable for police officers. But even
that sliver of light may have been extinguished, since Adelaide
house prices have risen so much since 2007.

Pervasive unaffordability: The
overwhelming majority of local government authority (LGA) areas were
unaffordable to key workers in the capital cities (Figures 1-5).

Nurses:
All LGAs were unaffordable to nurses in Sydney, Melbourne,
Perth and Canberra.

Teachers: All LGAs were unaffordable
to teachers in Sydney, Perth and Canberra.

Police Officers: All LGAs in Canberra
were unaffordable to police officers.

Fire
Fighters: All LGAs in Sydney, Perth,
Canberra and Darwin were unaffordable to police officers.

Ambulance Officers: All LGAs in
Sydney, Perth, Canberra and Darwin were unaffordable to police
officers.

Deteriorating affordability: It was not
always this way. BankWest reports that since 2002, median house
prices have increased at double the rate of key worker average
earnings. Housing affordability has deteriorated markedly since
2002, according to BankWest (Figure 6).

Nurses: In 2007, houses were
affordable to nurses in 4% of capital city LGAs. In 2002, houses
were affordable in 26% of capital city LGAs.

Teachers: In 2007, houses were
affordable to teachers in 9% of capital city LGAs. In 2002,
houses were affordable in 34% of capital city LGA.

Police
Officers: In 2007,
houses were affordable to police officer in 19% of capital city
LGAs. In 2002, houses were affordable in 47% of capital city
LGAs.

Fire
Fighters: In 2007, houses were affordable to fire fighters
in 9% of capital city LGAs. In 2002, houses were affordable in
29% of capital city LGAs.

Ambulance
Officers:In 2007,
houses were affordable to ambulance officers in 10% of capital
city LGAs. In 2002, houses were affordable in 32% of capital
city LGAs.

Planning
induced house escalation: These house price increases are the
direct result of urban planning
schemes that constrain the supply of land for housing and thus raise
its price. These trends have been documented in our Demographia International
Housing Affordability Survey, now in its fifth year
of publication.

The problem,
which has been increasingly acknowledged by economists in Australia
and abroad is the stingy land use policies that have driven
residential land prices through the roof in virtually all of the
capital cities. Often going under the name of “urban consolidation”,
the intention of these policies is to stop expansion further into
the plentiful land of the nation and force people to live closer to
the urban cores --- this in a nation with less than 0.3 percent of
its land area under urban development.

At least one
government understands. In its welcome relaxation of these
destructive regulations, the Victorian government cites housing
affordability as a principal justification.

All
workers are key workers: The problem goes
well beyond the key workers covered in the BankWest report. While
the nation needs key workers living close by to provide quality
service to life, limb and mind, their salaries depend on the taxes
and fees paid by other workers, many of whom have even lower
earnings.

Thus, as
devastating as the affordability problem is to key workers, the
crisis goes much deeper. An Australian household purchasing a house
will pay, on average 70 percent more today relative to income than
in the early 1990s. Things could get much worse, with predictions of
yet another period of
rising house prices relative to
incomes. Virtually all of the difference can be
attributed to regulations that seek to remake cities to match a
radical vision that is already well on its way to the Hong
Kongization of some Sydney neighborhoods.

Giving up on
the Great Australian Dream? The BankWest report notes that key
worker housing affordability is somewhat less dire with respect to
units. Police officers cannot afford units in 41% of capital city
LGAs, while other key workers cannot afford units in from 59% to 78%
of LGAs. Moreover, BankWest shows unit affordability, like house
affordability, deteriorating rapidly.

The
Great Australian Dream: Much of the
comfortable lifestyle of the nation is the result of the “Great
Australian Dream” of a house on a quarter acre block. Government
planning policy has largely made that choice illegal, or at least
unaffordable in recent years. Despite considerable evidence that
most people would prefer to live in their own houses (not units),
counter-productive planning strategies are attempting to diminish
the Great Australian Dream from a house on a quarter acre block to a
quarter floor in a high-rise block.

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Wendell Cox is a
principal of the consultancy Demographia, Visiting
Professor at the Conservatoire National des Arts et Metiers in Paris
and author of War on the Dream: How Anti-Sprawl Policy Threatens
the Quality of Life.